I hope you all are having a great week so far. Labor Day weekend is not too far away.
I wanted to let you all know that reconciling will be a 4 part series instead of a 3 part series (one more post after this post). I apologize about this. As mentioned before, there is so much information to share about this part.
Today, I will discuss the third part of reconciling your budget (which is the first part of doing the actual reconciliation of your budget).
In this process, you will be making sure that your income and expenses are correct for the month.
Before you start this process, make sure you get the following information:
- All of the receipts, copies of bills, and deposit slips you have kept with you (from the previous month)
- Copies of your bank statements or printouts and credit card transaction logs you can get online with those accounts(from the previous month) Don’t use credit card statements because the most recent statement might have transactions that have occurred a month or two ago (and are not relevant to the previous month). They also don’t include half of the transactions for the current month you are working on.
- The source you choose to record your income and expenses
Here’s how to double check your recordings of your income and expenses based off of the following sources:
- Go to your income page. Get all of sources that are related to income (deposit slips, paystubs, or bank statements). Find the first income transaction you have recorded. Find a source that confirms that transaction took place. Once you have done that put a check mark by it. Also, mark the source you used. Check through all of your sources related to income (to see if they have been marked or not) to make sure you haven’t missed recording an income transaction. Once all of the transactions have been checked, add them up for a total for the previous month.
- Go to your first expense page. Find the first transaction for that expense you have recorded. Find a source that confirms that the transaction took place (receipt, bank statement, credit card printout, copy of a bill). Once you have found that, put a check mark by that transaction. Mark the source you used as well. Do this for each expense page you have. Go through each source you have to make sure you haven’t missed recording a certain expense. If you have missed recording it, put it on the appropriate expense page. Once all of the transactions for each expense page have been checked, add them up for a total for the previous month (for each expense). Beware that there are some transactions at the end of the month that might not clear until the current month. Please do not delete those out. Also, do not include transactions that cleared at the beginning of the previous month for the month before.
- Get all of your totals on a separate sheet of paper in a list format (with Income on top and Expenses below that)
- Find the cell you recorded your income in. Go through your bank statement or bank transaction printout to see what actually went into your bank account for the previous month. Make sure that cell amount equals the total deposits you had for that month (Don’t include transfers from savings accounts or other internal source accounts). If not, see what happened. If it’s because you forgot to record a deposit from one of your paychecks, fix that cell amount. If it’s from an extra income source and gets electronically deposited into your account or if it’s holiday/birthday money you got, include it in your income.
- Go to the first cell of the first expense on the spreadsheet (in the actual expense column, not your budget column). Find all of the receipts or bills related to that expense. Total them up. Also, make sure you go through your bank and credit statements or printouts for the previous month. Highlight the transactions that you have a receipt or bill that corresponds to what you have already totaled up. Find transactions that go with the expense you are analyzing that you don’t have a receipt on. Add those transactions to the total. Beware that there are some transactions at the end of the month that might not clear until the current month. Please do not delete those out. Also, do not include transactions that cleared at the beginning of the previous month from the month before. If there are transactions that have cleared at the beginning of last month for the month before don’t include those. Keep your documents just in case. Once you do that, make sure the total matches what you have on the spreadsheet. If not, change the total to what you have. Do this for each expense you have recorded.
- Add up all of the income you have recorded in your check register. Make sure it matches what is your bank statement or printout for the previous month says.
- Add up all of the transactions for each expense in your check register. Go through bank statements and make sure you are not missing any transactions in your register (e.g. Bank Fee or a debit that you might have forgotten about). Include the missing transactions in your total. Also, if you have credit card transactions from your printout for that certain expense, include those in your total for that expense category.
- Put all of your totals together on a list in a notebook or source you want to use. Don’t lose that sheet.
- Go through all of your income and expense source receipts or bills you have and make sure they have been recorded into that software program. Also, make sure they have been recorded into the right bank or credit card account.
- Reconcile all of your bank accounts. Beware that there are some transactions at the end of the month that might not clear until the current month. Please do not delete those out. I recommend you do this to make sure you didn’t miss any transactions or misrecorded a transaction.
- Go through your credit card printout and make sure that you did not miss recording any transactions. Don’t include transactions that cleared at the beginning of the previous month for the month before. Don’t worry if there were transactions at the end of the month that are not on there. They will usually clear in the current month.
- Go to the reports section and print out a report that will tell you what your income and expenses were for the previous month. Get one with just numbers. On some software programs it’s called a Profit and Loss report.
Tomorrow, we will go over the final part of reconciling your budget. I promise you, we will be finished tomorrow with this. I apologize if this is aggravating some of you. I just want to make sure you are doing this stuff correctly, so you don’t have financial issues later on.
If you have any questions about this, please let me know.
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Thank You and Have A Great Day